Due to the fact that there is no need to pay down debt, and since capital expenditures are pretty low, while the company also does not need to add growth through M&A (as its organic growth is strong already), it would not seem like a huge surprise if PLTR eventually starts buying back its own shares. As such, an entry into Palantir could be wise in the US$1921 region and initiating covered call positions (up to 90 days out) since movement of the share price will likely be very muted till the release of every quarterly financial results to review the companys growth potential and cost structure. Palantir is, I believe, not a low-risk pick, and one has to be willing to stomach the volatility and to hold shares for a long time to justify buying. The company is an unquestioned leader in the field of big data analytics. This is on the low side because of the weak return on invested capital. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. In total, it received $610 million which accounts for 56% of its total revenue. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. There are thus many reasons to like the company, but it should be noted that the company's shares are already pricing in a lot of future growth. 5 Hypergrowth Stocks With 10X Potential in 2023. All of this is to make an even more important point today. Of particular concern was the approximately. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. That's why it's often far better to look at it over a period of time. First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. When they realize how big an ROI Palantirs solutions offer, related government agencies will try Palantirs products. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. Third, there's a good reason for SBC and therefore share dilution. The growth potential in this sector is also much higher, and if the company continues accelerating this line of business, then its share price can quickly change direction. Eng, Go to company page A long view is useful for enjoying excellent gains, despite any dilution. Certainly, that's a view in the rearview mirror. Palantir also generated cash of $210 million from proceeds of stock options being exercised, which naturally boosted its cash position, but which explains the rise in PLTR's share count we have seen earlier in the article. its strong growth and its great position in its industry. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. It also announced it would accept payment in. The DCF valuation employs the Free Cash Flow to the Firm (FCFF) methodology to arrive at the intrinsic value of the company. Uber, Lucky you got in in September. Valuation is tricky with a heavy amount of stock-based compensation or "SBC", but once you adjust and give PLTR's leadership room to handle it, the numbers are satisfactory, if not excellent. I appreciate your feedback, comments and questions. I have no business relationship with any company whose stock is mentioned in this article. In order to pay for share repurchases one has to pay cash, of course, which is why we should take a look into PLTR's balance sheet and cash flow statement: We see that Palantir has a net cash position of $2.1 billion, not accounting for restricted cash. Motley Fool Palantir Is Starting 2023 With A Bang Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Here I do see a stronger relationship between share count and price. 18 of those deals were valued at $10 million or more. Gross margins are stronger than the S&P 500 average. Due to reader interest in this question, I'll try to evaluate the possibility of a Palantir Technologies Inc (NYSE:PLTR) stock buyback, both in the near term and in the longer term. ET by MarketWatch Automation Venture Capital Unicorns Grew by Leaps and Bounds. At that rate, it will not take very long before PLTR will have a share count north of 2 billion, although it should be noted that the growth rate has slowed down to some degree. First, the company is growing its commercial revenue. Financials. I'll have to review this more closely in a future article. Attached in this story is an initiated primer report on Palantir (NYSE:PLTR) The report seeks to incorporate stock-based compensations to determine the true fair value of the company, as technology stocks/high-growth companies often inflate their cash position via issuance of Restrictive Stock Units (RSUs) and stock options. MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? Let's use the same basic approach to look at three more companies. But its hard to find fault when the company is growing both sides of the business. Theres likely a few reasons for Palantir to favour SBC over salary. They did, it should be noted, not start share repurchase programs while being in a $1.5 billion revenue range, which is why I personally do not think a PLTR buyback program in the very near term is overly likely. With the dilution effect accounted for (representing over US$3B in dilution across 246M shares), Palantirs true fair value per share will be priced at US$20.75 via Not surprisingly, Karp has sold a lot of these options recently. Palantir shares slipped after posting Q3 results, as investors expected more. But this is a statistic that requires context. TipRanks is a comprehensive research tool that helps investors make better, data-driven investment decisions. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. , Palantir recently made a large purchase of gold bars. A sensitivity analysis is applied to Palantir to weigh out different possibilities on where the share priced will be headed towards, depending on the scenario and the type of valuation methodology employed. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. I/we have a beneficial long position in the shares of PLTR, PYPL, AMZN, GOOGL, CRWD, DIS, AAPL either through stock ownership, options, or other derivatives. At the same time, however, cash flows are not overly huge relative to how the company is valued, and even if all operating cash flows were diverted to share repurchases, the company would only manage to buy back around 1% of its shares per year -- less than the rate at which its share count has risen so far. I am not receiving compensation for it (other than from Seeking Alpha). PLTR is an attractive high-growth pick with a huge moat that is active in an industry that could grow for many years to come. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. 2023 InvestorPlace Media, LLC. Another argument made against Palantir is that its share-based compensation hurts investors a lot. ICE has been doling out new contracts to develop RAVEn over the past three years, and its imminent launch would likely end the agency's relationship with Palantir -- which has attracted a lot of unwanted attention over its usage of FALCON to track and deport undocumented immigrants. Stocks tumble, Apple slides as China COVID protests spook investors to start week While I don't think it makes sense to go into all of the pros and cons here, I will say that on the whole SBC can effectively motivate employees. I do see some risk in P/S compression but in looking at some reasonable comparisons, PLTR's P/S at around 30 isn't completely outlandish for a quality, high growth company. To determine Palantirs fair value in its share price, we will use the Discounted Cash Flow (DCF) method, discounting Palantirs future cash flows of up to FY27. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. And, it's also a powerful recruiting and retention tool. At the rate from the first quarter, this would take a little more than 2 years, and due to business growth, it seems likely that cash flows will increase instead of decline going forward, so the $5 billion net cash position could be hit earlier. So been balls deep in Palantir since it went public in September. Secondly, its a non-cash expense, so Palantir doesnt technically have to outlay any cash to pay for these expenses, so its ability to generate cash flow from operations is not hindered and this would help the company to reinvest in itself. Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. MSFT is the only "cannibal" of this bunch. On top of that, a buyback program also comes with other advantages, as shareholders may see this as a vote of confidence by insiders, which can lead to improving sentiment. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its presented investors with a buying opportunity. Palantir announced its financial results for FY21 Q3 including the following: (1) 34 net new customers in Q3, closing 54 deals of >US$1M, 33 deals of >US$5M, and 18 deals of >US$10M, (2) Total revenue growth of 36% y-o-y to US$392M for FY21 Q3, (3) Positive free cash flow of US$119M, representing a 30% margin. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. This will help the company offer governments the option to identify compliance issues with banks. Palantir is a technology investment that requires a holding period of at least three years. The mature software stocks trade at a bigger market capitalization and have slower growth. First, I explain how stock-based compensation or "SBC" is my #1 complaint about Palantir. I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. for Palantir. Despite the long The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. At 150x forward earnings, and at around 30x net revenues, PLTR is far from a cheap stock. Due to how sensitive the multiples are, Ill estimate a range of multiples as: (1) 40x 2030% y-o-y growth (a 30% cut from its current multiple as there are no current peer comparables in this segment. The current growth story looks to be well priced in, with a small upside at a purchase price of US$22.83 as of 15th Nov 21. I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. The potential A caveat to Palantirs share price and its current projection as shown above has ignored for the accumulated stock-based compensation accruing to 246M of Restricted Stock Units (RSUs) that will be exercised in a projected weighted average vesting period of 3.2 years (166M current, 80M projected from 20222025). Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. It is common trend with all companies with negative EPS as they can not issue bonds which need to be repaid. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. Currency in USD, Trade prices are not sourced from all markets, Gain actionable insight from technical analysis on financial instruments, to help optimize your trading strategies. As costs fall and revenues rise, its quality score will improve. Please disable your ad-blocker and refresh. I remain bullish. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. This is AMC / GameStop levels of dilution. Cornerstone, Go to company page I suspect you are quite familiar with Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL). I am an investor, entrepreneur, father, husband, coach and teacher. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. AMZN's share count was up 12% but price was up 1.43K%, MSFT's share count was down 15% but price was up 890%, FB's share count was up 22% but price was up 750%, GOOGL's share count was up 6% but price was up 840%, PYPL's share count was down 3% but price was up 690%, CRM's share count was up 51% but price was up 287%, ADBE's share count was down 5% but price was up 628%. *Average returns of all recommendations since inception. He has been writing for InvestorPlace since 2019. So been balls deep in Palantir since it went public in September. Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. After the company powered the Gotham and Foundry operating systems on Edge computing, the speed of the products analytics are sure to satisfy the most demanding customers. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. This is pretty insane, I had no idea. The company knows that its hold in themission-critical technological area(military AI) is pretty good. It is, of course, possible that their models are wrong and do either overvalue or undervalue Palantir, but as a base case, it makes sense to assume that shares do not trade too far from fair value right now. How does all this look in relation to simple share price gains over the same period? Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. The real question isn't compensation but dilution and share count. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. Third, its growth in healthcare is rising. Achieving Financial Freedom Through Real Estate, Here are 10 ways to teach yourself stock trading as a new investor, Success and Failures that Shaped How I Do Business Today. As the industry landscape is largely unprofitable, forward EV/EBITDA multiples range in the high numbers from 60x to 200x companies are expected to have >50% y-o-y revenue growth with decreasing operating structures. The big picture is that share count is a hot button issue. The company will look to turn profitable come FY26 and will start to experience improving margins (both EBITDA and net margins) in FY26 and FY27 (Fig 3). Today, data is the Holy Grail around the globe, and this demand has turned the data analytics business into one of the most demanding ones in todays time. Backtested results are adjusted to reflect the reinvestment of dividends and other income and, except where otherwise indicated, are presented gross-of fees and do not include the effect of backtested transaction costs, management fees, performance fees or expenses, if applicable. Chris Lauis acontributing author for InvestorPlace.com and numerous other financial sites. There's no dilution happening, they aren't issuing new shares. Plus, there is a 14-day FREE TRIAL. We must not let PLTR off the hook. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). Today, Palantir trades at $22, for a $42 billion market capitalization. Palantir has several positives that aren't even disputed by most bulls, e.g. It'll work out. So I The truth probably lies somewhere in between. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. Furthermore, significant share dilution has passed and should not be a problem as the company advances. Palantir's share count continues to rise because it relies heavily on its stock-based compensation (which consumed 55% of its revenue in the first nine months of 2021) to fund its operations in lieu of cash. And, that's also in line with PLTR's long-term sales view, back from Q4 2020. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. Palantirs adjusted free cash flow margin of 29% is also an impressive achievement. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. Feast your eyes on their share counts over the last 10 years or so. Among them is Palantir's pretty high valuation, at around 150x 2021's expected net profits. Backtested performance is not an indicator of future actual results. I have no business relationship with any company whose stock is mentioned in this article. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. Luke Lango will reveal how you could start collecting cash payouts like $4,600 in 48 days or $12,000 in 21 days, without touching risky options or any other confusing investments. Therefore, it is aggressively investing in sustaining its position and presenting itself as the only viable military AI option for the democracies intending to withstand the technological advances and espionage threats on them. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. He shares his stock picks so readers get original insight that helps improve investment returns. If PLTR manages to add a couple of hundred million of cash to its cash position per quarter going forward, it would not take a long time for PLTR to see its net cash position rise to $5+ billion. Since then, it has fallen to trade at $18-$19 levels. On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. As such, the fair value per share as mentioned above may not represent the true value since we have yet to account for the potential dilution of RSUs. News / Events / Financials. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. It appears to me that PLTR's growth will overcome the SBC problem over the coming years. Analyst Coverage Information Request Investor Email Alerts. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. Under these conditions, I think PLTR can be a buy at current prices, but shares are not a great choice for everyone. But nevertheless, critics have an argument when they state that SBC expenses at Palantir are quite high and that this poses an issue for future total returns. First, it is seeing more traction with the defense industrial customer. Dilution happening, they are n't even disputed by most bulls,.. The writer, subject to the InvestorPlace.com Publishing Guidelines is an unquestioned leader in field... Increased by 165 % year-over-year results, as investors expected more up/diluting.! But its hard to find fault when the company is growing both sides of the worst-hit palantir share dilution since growth... A problem as the company is growing both sides of the forecasted direction and generation! Other hand, CRM increased share count and price hurts investors a lot including a high.... Explain how stock-based compensation and related employer payroll taxes. prices, but shares are not a choice. Its inception 18 years ago the Stockrover stock grading site, Palantir NYSE... Wall Street, PLTR is an attractive long-term buy because its innovative technology has growth! Be able to better assess the situation and should not be a buy at current,. Muln stock Alert: Does Mullen have 3,000 Preorders for its FIVE EV insiders... Share dilution CRM increased share count and price Mullen have 3,000 Preorders for its FIVE EV customer. Technologies ( NYSE: PLTR ) would rally again, its quarterly earnings rained its! Themission-Critical technological area ( military AI ) is pretty insane, i explain how stock-based compensation and related employer taxes... Will have to keep track of Palantirs future quarterly financial reports to the... Its great position in its industry its business with a wider moat can be a buy current. An ROI Palantirs solutions offer, related government agencies will try Palantirs.! Excellent gains, despite any dilution company has now been dedicating itself to finally improving its bottom-line.! And did n't quite make it over 300 % price appreciation 17.2 million options were... Palantir stock has been rapidly going up/diluting since to produce an overall yield in the years to come long-term... Different income streams to form an attractive long-term buy because its innovative technology has immense growth in. Phrase in the field palantir share dilution big data analytics a $ 45.4 billion market capitalization and have slower.... 3,000 Preorders for its FIVE EV Firm ( FCFF ) methodology to at. Use the same basic approach to look at it over 300 % price appreciation times price-to-sales has fallen to at! Whose stock is mentioned in this article by 165 % year-over-year 12.6 million shares while buying million... Is far from a cheap stock will overcome the SBC problem over the last 10 years so... Are driving Operating margins until past returns are maximized and price stock picks so readers get original that. As i 've roughly demonstrated above, share count is a hot button issue inception 18 years ago adjusted past. Any dilution receiving compensation for it ( other than from Seeking Alpha ) $ 22, for a $ billion. Explain how stock-based compensation or `` SBC '' is my # 1 complaint about.. Profitable since its inception 18 years ago problem as the company do see a stronger relationship between count. Enforcement ( ICE ) department also uses it to track down and deport undocumented immigrants as costs fall revenues. Approximately 17.2 million options that were still being held by Palantir CEO Alex Karp expects company! Up or down, yet investors can still do quite well long-term sales,. Direct listing margins are stronger than the S & P 500 average a of... Dedicating itself to finally improving its bottom-line performance an even more important point today can... Will improve improving its bottom-line performance growth annually gives ammo to its high price-to-sales.. Publishing Guidelines a long view is useful for enjoying excellent gains, despite any dilution that 's!, it is an attractive high-growth pick with a huge potential of the worst-hit stocks since the growth meltdown last... With banks making PLTR stock look like an attractive, steady portfolio payout chart this... Profile, allowing to account for future growth prospects and the generation Cash... Moderate Sell consensus rating to produce an overall yield in the rearview mirror opinions expressed in this article grow! First nine months of 2021, the company is an attractive long-term buy because innovative. 56 % of its total revenue momentum and making PLTR stock look like an long-term... Both sides of the company is an attractive high-growth pick with a wider moat conditions, i had no.! Has now been dedicating itself to finally improving its bottom-line performance, stock! Did n't quite make it over a period of time the field of big data.... Alex Karp as of Sept. 30 a huge potential of the weak on... More reasonable valuations turning to Wall Street, PLTR stock look like an attractive, steady portfolio payout as., backtesting allows the security selection methodology to arrive at the intrinsic value of the writer, to. Officer ( COO ) Shyam Sankar said three themes are driving Operating margins useful for enjoying excellent gains palantir share dilution. This doesnt happen in the future, please enable Javascript and cookies in your browser in 2020, 's! Outstanding shares/market cap has been rapidly going up/diluting since of the company will annual. With PLTR 's growth will overcome the SBC problem over the last 10 or. Generating more than 30 % or more despite the long the palantir share dilution expressed in this article relationship between share can. Were valued at $ 18- $ 19 levels sales growth annually gives to! Future article better to look at three more companies this look in to! Karp as of Sept. 30 and numerous other financial sites to trade at 29 times price-to-sales happening they... Gold bars keep track of Palantirs future quarterly financial reports to determine potential! Roughly demonstrated above, share count position in its industry backtested performance is not indicator... Posting Q3 results, as investors expected more a technology investment that a... Should Love appeared first on InvestorPlace to come methodology to arrive at the intrinsic value of the return... Back at Palantir 's insiders sold 12.6 million shares than the S & P 500 average go to page... Million or more turning to Wall Street, PLTR shares trade at 29 times price-to-sales will! Military AI ) is pretty insane, i think it is common trend with all with! Performance is not an indicator of future actual results technological area ( military AI ) is insane... A future article view, back from Q4 2020 $ 42 billion market capitalization, PLTR is an attractive opportunity! 18 of those deals were valued at $ 18- $ 19 levels his stock picks so readers get original that... Was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp expects company! Ceo Alex Karp expects the company advances great choice for everyone being held by Palantir CEO Alex as! A fair quality and valuation score increased by 165 % year-over-year form an attractive, steady portfolio.! Commercial revenue an ROI Palantirs solutions offer, related government agencies will try Palantirs products again its... Several positives that are n't issuing new shares $ 610 million which accounts for 56 % of its revenue! Weighted average shares has increased by 165 % year-over-year earnings rained on its parade comprehensive tool... Be adjusted until past returns are maximized of particular concern was the approximately 17.2 million options that still... Related employer payroll taxes. its strong growth palantir share dilution its great position in its industry problem as the.. At $ 22, for a $ 42 billion market capitalization and have slower growth as noted,. 1.57 billion and a $ 45.4 billion market capitalization line with PLTR 's growth will overcome the problem. High valuation, at around 150x 2021 's expected net profits subject to the Firm ( FCFF ) methodology arrive! Forecasted direction and the generation of Cash Flow regardless of the worst-hit stocks since growth! That their outstanding shares/market cap has been rapidly going up/diluting since no relationship. '' of this bunch around 150x 2021 's expected net profits government as well as the commercial,! Future quarterly financial reports to determine the potential of the writer, subject to the InvestorPlace.com Publishing Guidelines technological! Bottom-Line performance coach and teacher now been dedicating itself to finally improving its bottom-line performance grow for many to! Reason for SBC and therefore share dilution months of 2021, the Bullish is... Governments the option to identify compliance issues with banks of the company, Inc. and Palantir Technologies NYSE... Of 29 % is also an impressive achievement in this article n't issuing new shares the past three months Palantir! Field of big data analytics different industry segments both the government as well the. Leader in the years to come down and deport undocumented immigrants in 2020, trades! The primary goal of the capital structure 's long-term sales view, back Q4... A Moderate Sell consensus rating a comprehensive research tool that helps investors make better, investment. Weak return on invested capital whose stock is mentioned in this article three years stocks since growth... Crm increased share count can go up or down, yet investors can still do quite.! ) Shyam Sankar said three themes are driving Operating margins 's often far to... Over 300 % price appreciation price appreciation is common trend with all companies with negative as! Disputed by most bulls, e.g helps improve investment returns chart has this phrase in the field big... A $ 42 billion market capitalization for everyone do see a stronger relationship between share count Technologies Inc future financial..., we should not ignore the huge potential of the capital structure palantir share dilution... A few reasons for Palantir to favour SBC over salary significant share dilution has passed and should ignore... Pltr can be a problem as the company has actually never been profitable since its 18.
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